The Price Is Wrong at Cablevision

At this point, I'd say that Cablevision's (NYSE: CVC  ) many attempts to go private qualify as a saga -- one that appears to be turning against the company's ruling Dolan family.

For several years now, the family has tried unsuccessfully to take Cablevision private. The Long Island-based company was originally founded by family patriarch Chuck Dolan, and it's now overseen by his son, CEO Jim Dolan. Besides serving roughly 3 million cable, Internet, and telephone subscribers, Cablevision also owns Madison Square Garden, Radio City Music Hall, a programming arm, and a couple of Big Apple-area sports teams. Since 2005, the Dolans have made several offers to take the company private; Cablevision's board accepted the fourth and latest pitch, at $36.26 a share.

However, with a shareholder vote on that offer slated for next week, more and more institutional holders are digging in their heels in opposition. ClearBridge Advisors is a unit of Legg Mason (NYSE: LM  ) and Cablevision's largest outside holder, with 14% of the shares. This week, the group said it would vote no. That decision followed media investor Mario Gabelli's assertion that he similarly would oppose the deal with the 8.3% of the shares owned by his firm, Gamco Investors (NYSE: GBL  ) . Big institutional investor T. Rowe Price (Nasdaq: TROW  ) is apparently also leaning against supporting the buyout.

The deal's proposed price is these investors' sticking point. Given Cablevision subscribers' high-level demographics and the company's other assets, some critics contend that the company is worth as much as $50 a share.

So what is its real value? Based on the simple model I've constructed, I can easily get into the $40s per share, so approaching $50 isn't impossible. The outcome depends largely on the per-subscriber value I place on the telecommunications customers; Comcast (Nasdaq: CMCSA  ) recently paid about $6,000 per subscriber for a far smaller New Jersey operator with similar demographics.

My value estimate only reinforces my contention that the Dolans simply want to buy Cablevision at a lowball price, then flip it for a profit, perhaps to Time Warner Cable (NYSE: TWC  ) . After all, that company's Manhattan cable systems would fit like a glove with Cablevision's extensive presence in the surrounding metropolitan area.

On that basis, and because Cablevision's institutional investors are hardly stupid, I'd be shocked if the buyout effort succeeded. What's more, it'd be nice if the family were as concerned with shareholder value as it seems to be with Dolan shareholder value.

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